Dollar Tree buying Family Dollar with no store closings planned

Dollar Tree, Family Dollar: no closures planned after merger

Tim , Times Union

By Tim O'Brien

Published 8:32 pm, Monday, July 28, 2014

Exterior of a Dollar Tree store Monday, July 28, 2014, at Latham Farms in Colonie, N.Y. Dollar Tree reached an agreement to buy the Family Dollar chain for $8.5 billion in cash and stock. (Tom Brenner/ Special to the Times Union)

Exterior of a Family Dollar Store Monday, July 28, 2014, on Central Ave. in Albany, N.Y. Dollar Tree reached an agreement to buy the Family Dollar chain for $8.5 billion in cash and stock. (Tom Brenner/ Special to the Times Union)

Exterior of a Family Dollar Store Monday, July 28, 2014, on Central...

Exterior of a Dollar Tree store Monday, July 28, 2014, at Latham Farms in Colonie, N.Y. Dollar Tree reached an agreement to buy the Family Dollar chain for $8.5 billion in cash and stock. (Tom Brenner/ Special to the Times Union)

Exterior of a Family Dollar Store Monday, July 28, 2014, on Central Ave. in Albany, N.Y. Dollar Tree reached an agreement to buy the Family Dollar chain for $8.5 billion in cash and stock. (Tom Brenner/ Special to the Times Union)

Exterior of a Family Dollar Store Monday, July 28, 2014, on Central...

Exterior of a Family Dollar Store Monday, July 28, 2014, on Central Ave. in Albany, N.Y. Dollar Tree reached an agreement to buy the Family Dollar chain for $8.5 billion in cash and stock. (Tom Brenner/ Special to the Times Union)

Exterior of a Family Dollar Store Monday, July 28, 2014, on Central...

Exterior of a Dollar Tree store Monday, July 28, 2014, at Latham Farms in Colonie, N.Y. Dollar Tree reached an agreement to buy the Family Dollar chain for $8.5 billion in cash and stock. (Tom Brenner/ Special to the Times Union)

Two of the nation's largest discount store chains, both of which have outlets throughout the Capital Region, announced they would merge Monday.

Dollar Tree reached an agreement to buy the Family Dollar chain for $8.5 billion in cash and stock.

The two chains have different retail approaches: Dollar Tree's merchandise is all $1 or less, while Family Dollar sells discounted merchandise but doesn't limit its prices.

Family Dollar has about 18 stores in the region, while Dollar Tree has some 13 stores. Family Dollar is more common in rural and urban markets, while Dollar Tree has a more suburban base.

In announcing the purchases, the firms said there were no plans to shutter any stores.

Nationwide, the combined chain will have more than 13,000 stores in 48 states and five Canadian provinces, with sales exceeding $18 billion and more than 145,000 associates. It will surpass Dollar General as the large dollar store chain in the country when the purchase is completed early next year.

Michael Keara, managing director in equity research for Prime Executions Research, said Dollar Tree is a well-run firm that has been successful, while Family Dollar has struggled lately. Investor Carl Icahn purchased stock in the family-run Family Dollar chain and urged it to sell.

"For Dollar Tree, there are some positives and some negatives," he said. "It creates a national, big dollar-store chain."

Dollar Tree also inherits some of Family Dollar's issues, he said, and the two firms have to figure out how to blend their different approaches.

"It goes from a clean story to a complicated story," Keara said.

But he expressed confidence that the Dollar Tree management team would improve the acquisition's performance.

"Dollar Tree has always executed in the stores very well," he said.

In making the announcement of the planned merger, the two firms said they will continue to operate stores under both names. No plans to close any stores were announced.

"They are still operating as two different companies now," said Nathaniel Garnick, a spokesman for Dollar Tree. "It's premature to get into that. They are still going to operate both stores."

Keara said he is not surprised to hear that said at the outset, but it would not be surprising if some outlets were closed — especially if the chains have stores near each other. He said the real impact may be the opening of fewer stores under the combined chain than would have been done if they kept operating separately.

"The real issue over time is whether they stick with the Dollar Tree format," he said. "It's going to be interesting to see because Walmart is doing its own small stores. I think it's a negative for Walmart."

Among the places where Walmart has experimented with its smaller, neighborhood market format is in Niskayuna's Mansion Square retail plaza.